Taking historical strengths and embracing innovative partnerships, Abe Shokai strides forward positively.
Since COVID, we've seen serious disruptions to all industries, but especially the automobile industry. During COVID, you had a series of chip shortages that completely stopped manufacturers like Toyota from producing at certain plants. Since then, there have been a series of macro challenges when discussing supply chain disruptions, especially with China and the US and the geopolitical tensions between those two nations. And the Japanese yen is also very weak right now. Your company is very interesting in that you have a trading capability where you can procure foreign and Japanese parts. How have these challenges affected your business, especially the weakened yen, and how have you dealt with them?
Of course, the weak yen affects our business overall, so we are taking measures by setting up reserves for the FX rate or passing on some of the cost inflation in the pricing. However, price hikes can be made only up to the range that users will accept, so the impacts could be limited, but those are the measures we are taking.
If you look at the period from 2021 to 2023, Japanese automakers received a lot of criticism for their slow adoption of electric vehicles. There were a lot of articles in the press saying the industry wasn’t just late but was falling behind. And then a few months ago, the overall sales reports for last year came out, and it showed that EV sales growth had drastically slowed and even dropped in some countries, such as the UK. At the same time, hybrids had their best year to date, leading some media to apologize to Toyota literally. Japan was making a point that there was a need for transition technologies and that we could not just move directly into EVs. What are your thoughts on this situation, and how do you see the automotive market evolving in the near and medium term?
EV sales initially expanded slowly in the Japanese market due to the less robust EV infrastructure. Additionally, electricity in Japan is primarily generated by thermal or fire power generation, which are not environmentally friendly. For these reasons, EVs were not penetrating the Japanese market, and I had a lot of skepticism about EV expansion. In the mid-term, for the next ten years or so, hybrids will be the most rational system globally, not just in Japan, although the power system will not be based on gasoline or diesel.
Your business revolves around being an aftermarket specialist, providing certain products to help improve car performance or style. Still, when we compare internal combustion engine (ICE) cars with EVs or hybrids, for EVs especially, there are very limited modifications you can make to the drive train because it’s so simple, whereas, for an ICE vehicle, there are so many tweaks you can make. How do you expect your business to be affected by this, and are there products that you see coming to market that will create a demand for modification in the performance of EVs or hybrids?
There is more demand for tweaks than we expected regarding the tuning for EV cars. In terms of repair parts, of course, when we transition from ICE to EV, the number of repair parts will decrease. However, there is a specific demand for tuning. For example, the consumption of tires for EV cars is faster than for ICE cars, so tire sales are going well, and there is market demand to change the wheels as well. There is also demand for outdoor gears. Of course, Power-train tuning for EV will be limited, but there is a specific market size for interior/exterior goods.
This also hits at the core of Abe Shokai. Your company began originally by importing foreign parts in the sixties. You worked with AC Delco of the General Motors (GM) group and started your businesses with imported or aftermarket parts. Later, you added car-dealership functions. You have BMW, Ford, and Land Rover dealerships. What advantage does this historical business in parts bring to your dealership functions? What synergies have you created between these two distinct yet related business lines?
Because we have Abe Shokai, some customers ask for parts from Abe Shokai when we sell cars through Abe Motors. This is especially true for our BMW and Mini dealerships because many of those customers have confidence in the parts we sell through Abe Shokai. We launched the Land Rover dealership recently, and some customers are also requesting parts from Abe Shokai. So, in terms of synergy, each business works like a signboard for the other company. On top of that, since we have the BMW dealership, we also have the confidence of the other dealers, which facilitates our sales for Abe Shokai for those dealers. Abe Motors has seen that there are a lot of BMW customers who like to do some tuning with their vehicles so that we can refer those customers for parts, and we can also sell BMW vehicles to such customers because of this relationship.
Japan is home to some of the world’s most famous aftermarket parts makers, but you’re focused on European companies like Bilstein, Thule, and Pirelli tires. Can you tell us what distinguishes European aftermarket parts from Japanese-made ones and why you have not also attempted to integrate Japanese parts into your services?
We are so focused on the European parts makers because most Japanese parts are interconnected with the automakers. We started importing European parts for the aftermarket because the Japanese automobile market is closed. On the other hand, we found a lot of different parts and accessories in the European market, so we wanted to bring such a different European culture to Japan. That is the fundamental principle for this business. As you mentioned, we have a lot of aftermarket parts makers in Japan. However, we are sticking to this basic principle, and we still visit European countries and attend the exhibitions there to find things we cannot find in Japan or that will interest Japanese customers.
I saw you work closely with Bilstein to train technicians in Japan to the same level as the Bilstein engineers. Are you looking for new partnerships to expand your product portfolio or even new training or development services?
Of course, if there is any reliable and interested maker in the Japanese market, we would be open to forming a partnership with them and pursuing a long-term relationship with them. One of our newest partnerships is with Nokian. We visited their factories to learn more about their manufacturing process, and we’re continuing such study sessions with all our partners.
In recent years, in addition to importing foreign parts, you have tried to develop your car accessory brands. One example is the Offroad Club, which offers seat covers and in-car storage units. In the future, are you planning to continue to develop your original brands? Is that part of the strategy, and if so, what can we expect?
We are not trying to expand our original brands significantly, but developing foreign parts for Minis is best for us. We are dealing with parts from Bilstein or Eibach, and so on for the AMSECHS brand and are trying to apply those parts to our setting. That’s something that we would like to focus on.
Your company's exciting aspect is networking with the public and enthusiasts. Since your beginning, you’ve done many things, like bringing together motorsport enthusiasts for events. You also have your racing team now. Can you tell us your strategy for engaging the motorsport public or these enthusiasts?
The president of Abe Motors leads Motorsport, so I am not personally involved in that. In 2019, when he visited Fuji Speedway to watch the Mini challenge race, he didn’t find any official Mini dealer, which was quite disappointing. He thought if Abe Motors joined this race, it would work well for brand recognition. So that’s why he started working in motorsport. Another reason was that he felt if we joined the race as the official Mini dealer, it would enhance Mini’s attractiveness in the Japanese market.
What benefit has your racing team brought to you?
At that time, we had only one Mini dealership in Ota, but taking this opportunity to join the race increased the sales of tuning-related parts for genuine M performance parts and aftermarket parts such as AMSECHS a lot. It has also helped with recruiting mechanics, sales personnel, and service advisors for the dealers.
The racing team is still operated only by our employees, but based on the knowledge we gained through this experience, we launched a new business service in 2022 in which we have our customers drive in the race.
Traditionally, of course, cars are sold in the showroom. People check out the options, do a test drive, and then purchase. Now, you have a company like Tesla, which doesn’t have any showrooms, and car ownership is also changing. Many people say they no longer want to purchase a car but would instead buy a subscription to access a fleet of vehicles. And many people are buying cars directly from auction sites these days as well. In terms of consumer purchasing experiences, could you tell us how your business is adapting to these changing consumer preferences?
Makers such as Mercedes and BMW are about to launch direct sales of their cars. In Japan, of course, BMW Mini and Land Rover cars are sold as luxury, high-end vehicles. They are sold to people who want to enjoy the status of having those luxury cars, so I'm not sure if online sales will work for such types of vehicles or if customers will be satisfied through online sales. But if BMW officially starts selling online, Japan needs to follow suit. I believe that some types of BMWs are already sold online, but in the future, I think Japanese customers will not be satisfied with online sales and will want to return to the original way of selling. Also, as you said, Tesla doesn't have any showrooms, but on the other hand, BYD does, so different makers have different selling styles. We will watch these trends and decide accordingly, but I believe support from our sales reps will be necessary for our luxury cars to satisfy the customers.
Finally, please imagine that we come back to interview you again, let's say in 2028, the company's 80th anniversary. What objectives or ambitions would you like to have achieved by then?
In the last fiscal year, we achieved JPY 15 billion in sales, which we had set as a target several years ago. We are now entering June, and we are still determining our next goal. One of my personal targets was the average salary of our people. I wanted to pay a higher salary than similar-level companies, and we also met that target last year, so now I should make a new target related to the size of the company and the well-being of our employees.
For more info, visit: https://abeshokai.jp/
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